April 06, 2009

Retention Bonus Payout Policies Should Not Discriminate Against Execs

We’re all familiar with the “travesty” of AIG executives receiving retention bonuses at a time when the failing insurance giant is receiving an enormous lifeline, courtesy of the U.S. taxpayers.During the wildly overdone uproar last month, vile hypocrite Bawney Fwank was all-too-happy to grill embattled AIG CEO Edward Liddy over the payment of the bonuses, and Sen. Charles Grassley of Iowa went as far as suggesting that AIG execs should do the honorable thing and kill themselves.That’s great.It’s so nice to see all of this indignation from a body (the U.S. Congress) that is embarrassingly replete with tax cheats, liars, and all-around dirtbags; chutzpah can be a wonderful thing, I suppose, if you’re arrogant enough to express it and those around you haven’t enough spine to call you out. As for me, I'm waiting to see if any of these esteemed members of congress will be tossing themselves from a tall building in the wake of the lynching given the American taxpayer atop Mount Porkulus.

Now comes the news that retention bonuses far in excess of those paid out to AIG execs are scheduled to be paid to employees of Fannie Mae and Freddie Mac, the two stockholder-owned government sponsored enterprises (GSEs) that are every bit as responsible for this depression as AIG or any other entity.To review, the relaxing of underwriting standards at Fannie and Freddie, powered chiefly by liberal social engineering policies developed in both major parties over the last ten years, contributed substantially to both the cause and subsequent effects of the implosion.Many of those who were inclined to spit on AIG for handing out bonuses to execs seem comfortable in the hypocrisy that results from giving a thumbs-up to Fannie and Freddie bonuses by pointing out that even the small fry will share in the booty (although to be fair, Grassley, in an apparent attempt at appearing consistent, has gone on the record in recent days to express his outrage over the Fannie/Freddie bonuses).GSE regulator James Lockhart has said that it’s all OK because “many hard-working lower-level employees which are important to the mission of providing stability, liquidity, and affordability to the housing market” will get the money, too; it’s not just going to evil rich guys.

This is garbage.First, the bonuses scheduled to be paid to these GSEs over the next 18 months are substantially more than those paid to AIG ($210 million vs. $165 million).More importantly, there should be one standard here, regardless of what size these bonuses are or what level of employee may benefit.Any company that has seen its shareholder equity destroyed and is now largely dependent on government help for survival should expect to have its bonuses highly scrutinized and curtailed.I don’t care who suffers as a result; the fair application of the policy should remain paramount.In the end, if you decide that retention bonuses paid to Fannie and Freddie are fine because lots of “lower-level” people will share in them, but retention bonuses paid to AIG are wrong because they’re being paid to “higher-level” people, then you’re complicit in another of the many unfortunate cases of class warfare-cum-communism that we’re seeing now and which are important tools in the Obama-led assault on capitalism and the traditional American way of life.You know better than that.